As the recession deepened over the summer, the retail outlook remains bleak for the rest of 2011. Consumers are reluctant to spend amid an uncertain economic outlook where pay freezes and the prospect of unemployment are both an unfortunate reality, particularly in Europe and North America.

Director of Retail Intelligence for Synovate Retail Performance Tim Denison says, “Consumers are not in the position they were a few years ago to keep the economy buoyant. Footfall remains down by around 4% year on year, and it is difficult to see what will drive any immediate improvement now that the austerity measures are kicking in. Of course, it is not all doom and gloom; some retailers are well on their game and will prosper against their weaker competitors. For others, including many smaller independents, the pressure remains firmly on.”

Retailers have responded to challenging economic conditions with attractive price promotions. While this is expected to continue, in the long term rising costs of materials will be passed on by suppliers, and therefore additional methods will need to be rolled-out to sustain decreasing profit margins. 

Nevertheless, with the start of a new school year in September, parents have been gearing their kids up with essentials such as new school clothes, stationery, laptops, tablets and e-books. And business has been steady: the National Retail Federation in the US reported that retail spending increased 4% in July compared with the same month a year ago, fuelled by promotions for school supplies, clothing and electronics, while retail sales in the UK are up 2.5% over last year, according to KPMG’s July 2011 figures.

As independent retail stores continue to be severely challenged with footfall due to aggressive pricing tactics from the supermarkets and larger retailers, sales of books have also fallen to their lowest level in seven years in the UK, according to KPMG’s latest retail figures. Sales of e-books, however, are making up for the shortfall in print. Amazon’s Kindle e-book sales have already surpassed print four years after being introduced, and the Association of American Publishers revealed that e-book net sales increased by 115.8% from January 2010 to January 2011. According to KPMG’s latest Media and Entertainment Barometer, the average shopper spends £4 per month on e-books, which is double that spent on online games and four times as much as what people pay for streamed TV. 

It’s not just e-readers that are becoming part of the back to school campaign. Keen to tap into the burgeoning market for children’s tablet computers, technology toy company LeapFrog launched a child-friendly tablet this summer, the LeapPad Explorer, with over 100 apps and games based around phonics, maths and science aimed at children aged four and up. Pre-sales at major US retail websites such as Wal-Mart and Amazon sold out, leaving consumers hanging until late August when stock was re-supplied. The trend for tablets is set to continue and the portable, user-friendly device is on course to eclipse laptop sales in the next five years, according to Joseph Reger, Fujitsu’s Chief Technology Officer.

Coupled with cut-price uniforms and stationery purchased from supermarkets, tablets and e-books look set to score top marks for back to school retailers, even amid an uncertain economic future.

For more information, please contact Tim Denison, Director of Retail Intelligence for Synovate Retail in the UK at tim.denison@synovate.com.